How Can Farmers Use Their USDA Bridge Payments Wisely?

About one-third of lottery winners end up in bankruptcy court, according to the American Bankruptcy Institute. For individual farmers, the $12 billion bridge payments USDA announced Monday will hardly amount to Powerball riches, yet, may still prove tricky to manage. Just before this latest announcement of USDA help, a group of Kansas State University economists released suggestions on managing such payments.

The group’s “Top 5 Considerations for Managing Large, One-Time Government Payments” suggests paying down debt and thinking long-term.

They advise: “While it’s tempting to focus on short-term needs, overdue upgrades, or immediate tax strategies, the most strategic use of a large payment may be to reinforce  your farm’s long-term financial position.” That might mean trying to build working capital. “Rebuilding this cushion should be a top priority,” they said.

The other three tips: Use good cash flow planning, evaluate equipment purchases carefully, and avoid letting the payment boost cash rent expected by landlords.

In addition, they said, “Talk with your tax advisor early to avoid surprises.”

You should know before the end of this month an estimate of your bridge payment, which is expected in February of next year.

That may give you just enough time for tax planning before the end of 2025, in case your operation needs to juggle expenses or receipts from one year to the other.

“Some operations may hold grain, due to improved cash flow,” the economists said. “This decision can affect tax liability and price risk exposure.”

The group’s final piece of advice could apply either to winners of state lotteries or recipients of large federal payments:

“Ad hoc payments can be an opportunity to rebuild your financial foundation but may have lower benefits if treated as extra cash to deploy quickly.”

Check out the full report here.